Why These Special Requirements Matter
Standard title insurance covers basic ownership issues, but certain property types create unique risks that need extra protection. When you buy a condo, you're not just buying your unit — you're also buying a share of common areas like hallways, pools, and parking lots. If there's a lien on those common areas or a dispute about HOA assessments, your ownership could be at risk.
Say you're buying a condo unit where the HOA fell behind on paying contractors who worked on the roof. Without proper title insurance endorsements, a mechanic's lien on the common areas could threaten your mortgage. The special endorsements required by Fannie Mae protect against these scenarios.
For leasehold properties, you don't own the land — you lease it. If something goes wrong with that ground lease, your "ownership" of the building could disappear. The required endorsements protect against lease-related title problems.
Required Endorsements for Condos and PUDs
Condo mortgages must include an ALTA 4 or 4.1 endorsement. PUD mortgages need an ALTA 5 or 5.1 endorsement. These endorsements must be physically attached to your title policy or written into the policy text.
The endorsements protect you against several specific risks. They ensure your mortgage takes priority over unpaid HOA assessment liens. They protect against title problems caused by violations of the project's master deed or CC&Rs.; They also confirm that your unit doesn't encroach on neighboring units or common areas, and vice versa.
For condos, the endorsement must verify that real estate taxes are assessed against your individual unit, not the entire project. For PUDs, it must confirm your membership in the homeowners association transfers with the property when you sell.
How Lenders Handle Common Area Ownership
The title insurance must address who owns the common areas. In some projects, unit owners hold common areas as "tenants in common" — meaning you own a fractional share. In others, the HOA owns the common areas separately.
When the HOA owns common areas, the title policy must show that the HOA has clear title to those areas. This includes protection against mechanic's liens for work that started before your policy was issued. If contractors were working on the pool or clubhouse before you closed, their potential liens can't threaten the common areas you'll be using.
Special Requirements for Other Property Types
Co-op loans need title evidence showing you have good title to your shares and the co-op corporation has clear title to the building. In states where co-op shares are considered real property, you need a full title policy. Where they're personal property, the title requirements are less formal but still must be documented.
Leasehold properties require ALTA Endorsement 13.1. This endorsement addresses the unique risks of owning a building on leased land. It protects against problems with the ground lease that could affect your mortgage.
ARM loans need ALTA Endorsement 6, which addresses the variable nature of adjustable-rate mortgages. Manufactured home loans require ALTA Endorsement 7, 7.1, or 7.2, depending on how the home is classified and attached to the land.
Construction Loan Title Insurance Complexities
Construction-to-permanent loans create timing challenges for title insurance. The policy must cover the full mortgage amount from day one, even though the house isn't built yet. It needs a "pending disbursements" clause that protects the lender as construction funds are released.
When construction finishes, you need a final endorsement that extends the policy's effective date to cover the completed work. This protects against liens from contractors or suppliers who worked on your project.
If you're doing a two-step process — separate construction and permanent loans — the permanent loan follows standard title insurance rules. But single-close construction loans need these special provisions throughout the building process.
What Documents Your Title Company Needs
Your title company will handle most of these requirements, but they need specific information from you and your lender. For condos and PUDs, they need copies of the master deed, CC&Rs;, and current HOA financial statements. They'll verify that HOA assessments are current through closing.
For leasehold properties, they need the ground lease documents and any amendments. For construction loans, they need the construction contract, building permits, and lien waiver forms from contractors.
The title company will order the appropriate endorsements based on your loan type and property. Your lender should specify which endorsements are required in their title insurance instructions.
Common Problems That Delay Closing
HOA assessment issues cause frequent delays. If the seller owes back assessments, those must be paid before closing. In some states, HOA liens take priority over mortgages for a limited amount, so the title company must verify those assessments are current.
Encroachment issues can derail condo closings. If the survey shows your unit encroaches on common areas or neighboring units, the title company may refuse to issue the required endorsements. These problems often require legal resolution before closing can proceed.
For leasehold properties, problems with the ground lease can stop the transaction. If the lease is about to expire, has been violated, or contains problematic terms, the title company may not be able to provide the required coverage.
Construction loan title issues often involve mechanic's liens. If contractors haven't been paid or proper lien waivers weren't obtained, the title company may require those issues to be resolved before issuing the final endorsement.
References
For the official guidelines, see B7-2-04: Special Title Insurance Coverage Considerations in the Fannie Mae Selling Guide.
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Original Fannie Mae Guideline Text
B7-2-04, Special Title Insurance Coverage Considerations (05/03/2023)
Condo and PUD Unit Mortgages
The title insurance policy for a condo or PUD unit mortgage must describe all components of the unit estate.
For condo units, an ALTA 4 or 4.1 endorsement or its equivalent is required. For PUD units, an ALTA 5 or 5.1 endorsement or its equivalent is required. These endorsements must be attached to each policy or incorporated in the text of the policy.
If the unit owners own the common areas of the project as tenants in common, the policy for each unit mortgage must reflect that ownership. If the homeowners' association owns the common elements, areas, or facilities of the project separately (or holds them in a leasehold estate), the title insurance on those areas must insure that ownership. This title policy must show that title to the common elements, areas, or facilities is free and clear of any objectionable liens and encumbrances, including any statutory or mechanic's liens for labor or materials related to improvements on the common areas that began before the title policy was issued.
The title policy must protect Fannie Mae by insuring the following:
that the mortgage is superior to any lien for unpaid common expense assessments. (In jurisdictions that give these assessments a limited priority over a first mortgage, the policy must provide assurance that those assessments have been paid through the effective date of the policy.)
against any impairment or loss of title of Fannie Mae's first mortgage caused by any past, present, or future violations of any covenants, conditions, or restrictions of the master deed for the project. (It must specifically insure against any loss that results from a violation that existed as of the date of the policy.)
that the unit does not encroach on another unit or on any of the common elements, areas, or facilities. (The policy also must insure that there is no encroachment on the unit by another unit or by any of the common elements, areas, or facilities.)
that the loan is secured by a unit in a condo project that has been created in compliance with the applicable enabling statutes;
that real estate taxes are assessable and lienable only against the individual condo unit and its undivided interest in the common elements, rather than against the project as a whole; and
that the owner of a PUD unit is a member of the homeowners' association and that the membership is transferable if the unit is sold.
Co-op Share Loans
When co-op shares are recognized as real property, a title policy is required. Title evidence for a co-op share loan must ensure that:
the title is generally acceptable,
the borrower has good and marketable title to the shares, and
the co-op corporation has good and marketable title to the project.
When co-op shares are considered personal property and therefore cannot be insured under standard title policies, the title must be generally acceptable, the borrower must have title to the shares, and the co-op corporation must have good and marketable title to the project.
Mortgages Subject to Leasehold Estates
A mortgage that is subject to a leasehold estate must have an ALTA Endorsement 13.1.
For loans secured by properties held by a community land trust, see Title Insurance and Delivery Requirements in B5-5.3-03, Shared Equity Transactions: Eligibility, Underwriting and Collateral Requirements.
Other Mortgages
The table below provides the title insurance coverage requirements or endorsements for other types of loans.
Title Insurance Requirements
Conventional HomeStyle loan or FHA Section 203(k) home improvement loan
The policy must cover the full amount of the recorded mortgage, must be dated concurrently with the recordation of the mortgage, and must be updated to the date on which renovation work is completed.
ARM loan
The policy must include ALTA Endorsement 6.
Manufactured home loan
The policy must include ALTA Endorsement 7, 7.1, or 7.2.
Native American Housing Initiative loan
For a HUD-guaranteed Section 184 mortgage, when title to the security property is held as a fee simple estate, Fannie Mae requires a title insurance policy that satisfies its general requirements.
For all other HUD-guaranteed Section 184 mortgages, Fannie Mae relies on the title status report issued by the Land Titles and Records Office of the Bureau of Indian Affairs.
Texas Section 50(a)(6) loan
Fannie Mae requires a Mortgagee Policy of Title Insurance (Form T-2), supplemented by an Equity Loan Mortgage Endorsement (Form T-42) including the optional coverage provided by Paragraph 2(f) and a Supplemental Coverage Equity Loan Mortgage Endorsement (Form T-42.1). Refer to
When closed as a single transaction for both the construction loan and the permanent financing, the policy must be dated concurrently with the date of the mortgage and must include (1) a "pending disbursements" clause and (2) a final endorsement to the title policy that extends the effective date of the coverage to the later of the final construction advance date or the endorsement date.
When closed as two separate transactions (one for the construction phase and one for the permanent financing), the policy must satisfy Fannie Mae's standard title insurance requirements for permanent mortgages.
an affirmative endorsement to the title insurance policy is obtained regarding Exclusion 3(b) in the standard ALTA terms and conditions; or
the title insurer has not taken an exception for the remote notarization in the title insurance policy and all related communications with the title insurer are kept in the loan file.
B5-5.3-03, Shared Equity Transactions: Eligibility, Underwriting and Collateral Requirementsfor requirements related to loans secured by properties held by community land trusts and loans secured by properties with income and resale price restrictions. SEL-2020-05
